DBRS Assigns Provisional Rating to Driver thirteen UG (Haftungsbeschränkt)

DBRS Ratings Limited (DBRS) has today assigned provisional ratings to the following notes issued by Driver thirteen UG (Haftungsbeschränkt) (the Issuer):

-- €691,500,000 Class A Notes at AAA (sf)
-- €25,500,000 Class B Notes at A (high) (sf)

Driver thirteen UG (Haftungsbeschränkt) is a securitisation of a portfolio of auto loan receivables issued in Germany and originated by Volkswagen Bank GmbH (the Seller or the Servicer or VW Bank). The portfolio consists of auto loan receivables granted to private individuals and commercial entities to finance the purchase of new and used vehicles. The transaction will use the proceeds of Class A, Class B, Subordinated Loan and overcollateralisation to purchase the €840.57 million portfolio. The portfolio will be serviced by VW Bank.

The ratings are based on review by DBRS of the following analytical considerations:

-- Transaction capital structure and form and sufficiency of available credit enhancement; the initial Class A Notes’ 9.00% credit enhancement consists overcollateralisation ([0.70]%), subordination of the Class B Notes ([3.40]%), a Subordinated Loan ([3.70]%) and a Cash Collateral Account ([1.20]%). The Class A Notes will start to amortise after closing with no payment on the Class B Notes until Class A overcollateralisation reaches its target of 11.00%. Once the Class A overcollateralization target is reached, the Notes will amortise pro rata. The initial Class B credit support of [5.60]% includes overcollateralisation ([0.70]%), a Subordinated Loan ([3.70]%) and a Cash Collateral Account ([1.20]%). Class B overcollateralisation in the transaction will build to a target of 7.00%.

-- The ratings of the Class A and Class B Notes address the timely payment of interest and full payment of principal by the legal final maturity date in accordance with the terms and conditions of the Notes.
-- The portfolio consists of 100% auto loan receivables that pay an effective fixed interest rate while the Notes pay a floating interest rate. The transaction will enter into a fixed to floating interest rate swap to mitigate the risk that may arise from any mismatch between the effective fixed interest rate paid by the portfolio of receivables and the one-month Euribor index paid on the Notes.
-- As of October 2014, the initial portfolio’s main characteristics as a percentage of the discounted balance include: (1) 53,762 auto loans and €15,635 average loan amount where the top 20 customers account for 0.35% of the portfolio; (2) 47.35 months weighted-average (WA) original term, 38.91 months WA remaining term and 7.59 months seasoning; (3) 100% of the auto lease receivables are tied to a fixed rate with a WA effective interest rate of 2.94%, whereas the initial portfolio discounted rate is 1.444%. (4) 99.67% of the auto loans were granted to private individuals and 0.33% to commercial entities; (5) 99.75% of the borrowers pay via direct debit; (6) auto loans granted to purchase new cars represents 67.3% (including 12.39% demo cars) and 32.67% used cars; (7) 85.69% of the pool are balloon loans versus 14.31% amortising loans whereas the average balloon payment of the portfolio stands at 43.59%; (8) the top three concentrations by vehicle brand are Volkswagen (55.4%), Audi (24.0%) and Skoda (14.1%) and (9) the top three geographical region concentrations are North Rhine-Westphalia (20.68%), Bavaria (14.34%) and Baden-Württemberg (11.72%).

-- Relevant credit enhancement is in the form of subordination. Credit enhancement levels are sufficient to support DBRS-projected expected credit loss assumptions under various stress scenarios at AAA (sf) and A (high) (sf).
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested.
-- The transaction parties’ capabilities with respect to originations, underwriting, servicing and financial strength.
-- The credit quality of the collateral and ability of VW Bank to manage collections activities on the collateral.
-- The legal structure and presence of legal opinions addressing the assignment of the assets to the Issuer and the consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions.”

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is Rating European Consumer and Commercial Asset-Backed Securitisations. Other methodologies and criteria referenced in this transaction are listed at the end of this press release and can be found at http://www.dbrs.com/about/methodologies.

The sources of information used for this rating include VW Bank and Citigroup Global Markets Limited. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality. DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

-- Base case probability of default (PD) of 2.16%, a 25% and 50% increase on the base case PD.
-- Base case recovery rate of 50% (or a loss given default (LGD) of 50%), a 25% and 50% increase on the base case LGD.

DBRS concludes that for the Class A Notes:
-- A hypothetical increase of the base case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would downgrade the rating of the Class A Notes to AA (high) (sf).
-- A hypothetical increase of the base case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would downgrade the rating of the Class A Notes to AA (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would downgrade the rating of the Class A Notes to AA (low) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would downgrade the rating of the Class A Notes to A (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would downgrade the rating of the Class A Notes to A (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would downgrade the rating of the Class A Notes to A (low) (sf).

DBRS concludes that for the Class B Notes:
-- A hypothetical increase of the base case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would downgrade the rating of the Class B Notes to A (low) (sf).
-- A hypothetical increase of the base case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would downgrade the rating of the Class B Notes to BBB (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would downgrade the rating of the Class B Notes to BBB (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would downgrade the rating of the Class B Notes to BBB (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would downgrade the rating of the Class B Notes to BBB (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would downgrade the rating of the Class B Notes to BBB (low) (sf).

For further information on DBRS historic default rates published by the European Securities and Markets Administration in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: David Sanchez Rodriguez
Initial Final Rating Date: 14 January 2015
Initial Final Rating Committee Chair: Chuck Weilamann
Lead Surveillance Analyst: Vito Natale

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960.

The rating methodologies and criteria used in the analysis of this transaction can be found at:
http://www.dbrs.com/about/methodologies

Rating European Consumer and Commercial Asset-Backed Securitisations
Legal Criteria for European Structured Finance Transactions
Operational Risk Assessment for European Structured Finance Servicers
Derivative Criteria for European Structured Finance Transactions
Unified Interest Rate Model for U.S. and European Structured Credit